With 2012 just beginning, now's a smart time to gauge how the stocks you're interested in are likely to do this year and beyond. By knowing what stock analysts and fellow investors expect from a stock, you'll be smarter about whether you should buy it for your portfolio -- or sell it if you already own it.
Today, let's take a look at Discover Financial
Forecasts on Discover Financial
|Median Target Stock Price||$30|
|Fiscal 2012 EPS Estimate||$3.34|
|Fiscal 2013 EPS Estimate||$3.35|
|Expected Annual Earnings Growth, Next 5 Years||10.5%|
Source: Yahoo! Finance.
How will Discover Financial perform in 2012?
Analysts have mixed feelings about Discover. The target price for the stock is only around 10% higher than current levels, and earnings are seen remaining stagnant over the next year or two. Longer term, though, earnings growth is expected to pick up. Motley Fool CAPS members share that ambivalence with a neutral three-star rating.
Discover flies beneath the radar of most people following the credit card industry. Visa
But things are looking up for the company. In the past year, Discover reported just $2.1 billion in net charge-offs, compared to $3.8 billion in 2010. Because Discover takes on credit risk, it acts like a hybrid between a card network and an issuing bank. That combination hasn't done any favors to fellow card issuer Bank of America
The interesting question is how Discover will respond to big changes in the industry. Although Discover offers debit and prepaid cards, they haven't gotten the same attention as similar offerings from Visa and MasterCard. Moreover, with smartphone-based payment systems moving forward and potentially changing the entire landscape for credit cards, Discover needs to keep up. Discover is making some of the right moves, joining American Express
With banking, credit cards, and a range of other financial services, Discover needs to find better ways to differentiate itself from the crowd. But with plenty of room for growth, 2012 might be the year Discover can make a big move forward. It'll just take a lot of work.
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Click here to add Discover Financial to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
Fool contributor Dan Caplinger doesn't own shares of the companies mentioned. The Motley Fool owns shares of Mastercard and Bank of America. Motley Fool newsletter services have recommended buying shares of Visa and writing a covered strangle position in American Express. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Fool has a disclosure policy.